India's cosy relationship with Russia may not last for long

India’s love affair with Russia in the diplomatic war over Ukraine is nearing its end. Difficult choices loom

Ukrainians visit the exhibition of destroyed Russian military vehicles on Khreshchatyk street in Kyiv, Ukraine
Ukrainians visit the exhibition of destroyed Russian military vehicles on Khreshchatyk street in Kyiv, Ukraine

Saurabh Kumar Shahi

The war in Ukraine, already six months old, is settling into a grind. The Russians are eating through Ukrainian manpower with very limited losses of their own. However, it will take several months to capture everything east of Dnipro, the minimal goal set by Russia.

On the diplomatic front as well, things are settling down. It was revealed late last week that European countries have not pledged even one bullet to Ukraine after July. This curious behaviour by Europe has raised alarm bells everywhere, including in New Delhi.

War fatigue has engulfed Europe and several countries — except for historically Russophobe ones like Poland and the countries in the Baltics —are now sending a tacit signal to Moscow that a diplomatic solution shall be in the offing if all sides make a climbdown.

European capitals now want the war to end and sanctions on Russia lifted. Winter is approaching and the price of gas has hit historical highs. Even if Europe manages to scrape through this winter through alternative sources, its economic model, which was entirely based on cheap Russian energy, is now in serious danger.

Understandably, Germany, Europe’s growth engine, wants Russian gas to once again flow through the pipelines. Such is the desperation that EU-3, France, Germany and UK, which otherwise catch a cold if the US sneezes, are now bearing upon the latter to come back to the Iran JCPIA deal from which it had illegally withdrawn.

People attend a march in Krakow, Poland, on the Independence Day of Ukraine
People attend a march in Krakow, Poland, on the Independence Day of Ukraine

What does this mean for India? India benefitted from the situation initially. Stunned by the seizure of its forex parked in other countries, Russia initially panicked. It started offering oil at discounted rates and on terms lopsidedly determined by buyers. India suddenly became one of the biggest buyers of Russian oil. Not only was it buying for its own consumption but also helped European countries bypass their own sanctions.

The recent exemption granted to India by the US House of Representatives from sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA) for its S-400 missile deal with Russia is also encouraging other customers to buy Russian equipment defying the sanctions. India has contracted S-400s for five regiments for $5.43 billion and deliveries are now under way.

Russia has also emerged as one of the major suppliers of coal to India. Steel and cement makers and power companies are the top buyers. While steel mills are exploring PCI (pulverised coal injection) coal, cement makers are ordering thermal coal from Russia. For July, thermal coal imports (from Russia) jumped more than 50% over June, while coking coal imports rose by over two-thirds, data from Coalmint showed.

However, things have started to change. Oil from Russia, including Urals and Siberian Light, while still selling lower than Brent, has started to close the price gap. This has been achieved through record buying of Russian oil by China, India, Brazil and Turkey.

A protest march
in Berlin on
August 24, the
Day of Ukraine
A protest march in Berlin on August 24, the Independence Day of Ukraine

India was purchasing a lot of oil in Indian rupees and after a point, Moscow had to tell India to stop paying in INR… Because it does not know what to do with so much Indian currency. India is a net importer from Russia but Russia buys very few things from India. There is no way it can hope to spend all that Indian money. Since Indian rupee is not a part of the international basket of currencies either, Russia cannot use it to settle accounts with most countries.

There is another problem as well. Initially, Russia invited several Indian companies — including big consumer electronic brands and automobile companies — to fill the gap created by the withdrawal of Western corporations.

However, it soon realised that Indian companies cannot scale up at short notice. Most of that vacuum is now being filled by the Chinese and the Turks. It, therefore, made sense to trade in yuan.

When this clarity emerged, Russia promptly started asking Indian importers to pay either in ruan or in rouble. Sources say that this has made India shift back to Iraqi and Saudi oil.

As far as bypassing sanctions is concerned, here too. Moscow was made an offer it could not have declined. Not only is Turkey paying half of the proceeds in rouble, but it has also come up with an innovative idea to circumvent sanctions.

Sources say that Turkey will likely allow Moscow to buy nominal stakes in Turkish refineries, strategic storage and terminals. This will make it difficult to trace the origin of Russian oil, thereby bypassing sanctions. This is a more permanent and fool-proof way than the ones offered by Indian importers.

Things came to such a boil that NSA Ajit Doval had to rush to Moscow to firefight. While the official communiqué was full of usual bombastic and self-important missives that the current political dispensation in New Delhi is known to resort to, sources painted a more complex picture.

Doval apparently raised the issue of Moscow’s strategic tilt towards China in the light of the utterly provocative and self-serving trip by Nancy Pelosi to Taiwan. Moscow clearly sees Beijing as a more trusted partner in forming a bulwark against the America-led Western order than it sees New Delhi.

Much was made of the current dispensation’s “strategic independence” in the light of the fallout of SMO in Ukraine. However, India was not the only country telling the US to take a hike. Countries like Brazil, Indonesia, Malaysia and South Africa also did the same.

It is important to remember here that unlike the Modi government — which finds itself in an enviable position because of the USA’s dependence on India in its protracted war to stop the rise of China — the aforementioned countries are not an important cog in the anti-China alliance and had much less breathing space to maintain their strategic independence in the face of the West’s diplomatic onslaught. But fight they did and came out with their honour unscathed.

The Modi government’s famed strategic independence will be tested very soon. The joyride is over. Russia is not a strategic threat to US hegemony; China is. After initial huffing and puffing, it was always going to treat countries not toeing its line on Russia with kid-gloves. After all, Turkey, a NATO ally, is helping Russia bypass sanctions right under NATO’s nose. Its expectations from India were anyway low.

As battle lines are drawn over China, Washington will show much less flexibility to understand India’s position. It will expect India to be a frontline State. No amount of hemming and hawing will then be of any use. Fealty will be demanded. And the US shall ensure it gets it. Prime Minister Narendra Modi’s famed negotiating skills are going to be tested soon. Fear for that day.

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